Judge Review grant MSJ to confirm insurance liability

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					      1:10-cv-10757-TLL-CEB Doc # 25              Filed 11/03/10 Pg 1 of 18        Pg ID 298



                             UNITED STATES DISTRICT COURT
                             EASTERN DISTRICT OF MICHIGAN
                                  NORTHERN DIVISION

LIBERTY MUTUAL FIRE INSURANCE CO.,

                       Plaintiff,
                                                              Case No. 10-cv-10757-TLL-CEB
v.                                                            Honorable Thomas L. Ludington

KYLE MICHAEL BEACH, CHARLES KURT
BEACH, DANIEL REISS, AND JUDITH REISS
as NEXT FRIEND of SDR, VR, and NR, minors,

                  Defendants.
__________________________________________/

                         OPINION AND ORDER GRANTING
                  PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

       On February 24, 2010, Liberty Mutual Fire Insurance Company (“Plaintiff” or “Liberty

Mutual”) filed a complaint against Kyle Michael Beach, Charles Kurt Beach, Daniel Reiss, and

Judith Reiss as next friend of SDR, VR, and NR, minors (collectively, the “Minor Children”), for

declaratory judgment [Dkt. #1]. Liberty Mutual seeks a declaratory determination that its obligation

to indemnify its insureds under a policy purchased by Charles Beach for his liability to third parties

is limited to a $100,000 per person for damages arising out of a automobile/motorcycle accident (the

“Accident”) that occurred on September 3, 2007.

       Now before the Court is Plaintiff’s motion for summary judgment [Dkt. # 18], filed on June

14, 2010. Liberty Mutual contends that the policy limits for third party claims for bodily injury by

any one person in any one auto accident is $100,000 per person and $300,000 per accident. They

further contend that only one person, Daniel Reiss, sustained bodily injury in the Accident. Liberty

Mutual asserts that Daniel Reiss’ children’s claims against Kyle Beach, the driver of the vehicle, and

Charles Beach, the owner of the vehicle, derive from their father’s physical injury in the accident
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and are thus subject to the policy limits applicable to their father. Consequently, Liberty Mutual

contends its limit of liability for damages for which the insureds are legally responsible because of

the Accident is $100,000. Neither Kyle Beach nor Charles Beach, Liberty Mutual’s insureds, filed

an answer to Plaintiff’s complaint. Defendant Daniel Reiss filed a response on June 30, 2010 [Dkt.

# 21] and Defendant Judith Reiss, however, filed a response on July 2, 2010 [Dkt. # 22]. Both

Daniel Reiss and Judith Reiss assert that the $300,000 per accident is the appropriate limit of

liability because Daniel Reiss’ three minor children have separate and independent claims against

the insureds for damages resulting from their father’s injuries. Plaintiff filed its reply on July 26,

2010 [Dkt. # 24].

       The Court has reviewed the parties’ submissions and finds that the facts and the law have

been sufficiently set forth in the motion papers. The Court concludes that oral argument will not aid

in the disposition of the motion. Accordingly, it is ORDERED that the motion be decided on the

papers submitted. E.D. Mich. LR 7.1(e)(2). For the reasons stated below, the Court will GRANT

Plaintiff’s motion for summary judgment.

                                                  I

       On September 3, 2007, Defendant Daniel Reiss was involved in a motorcycle/automobile

accident with Defendant Kyle Beach and his twin brother, Kurt. The accident occurred at

approximately 7:58 p.m. at the intersection of Court Street and North Charles Street in Saginaw,

Michigan. Earlier that day, Kyle and Kurt Beach, then 20 years old, left their parents home in

Saginaw to travel to a wooded lot in the Hemlock area and deliver firewood to a customer in St.

Charles as a part of their side business of selling firewood. Kyle was driving a Chevrolet Blazer,

which was titled in his father’s, Charles Beach’s, name. After delivering the firewood in St. Charles


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and approximately two hours before the accident, Kyle and Kurt drove to the Marathon Fast Pax

Food Store (“Marathon Store”) in St. Charles. Kyle, a minor, entered the Marathon Store and

purchased beer. Kyle later stated at his deposition that he had purchased beer at the same store as

many as ten time before that day. The beer was consumed as Kyle drove from St. Charles to Murin

Company, Kyle and Kurt’s place of employment, to return the trailer they borrowed to haul the

firewood. Kyle drank the majority of the beer and had not previously drank that quantity of beer

while driving. All of the beer was consumed before the accident and the containers were discarded.

        While driving from Murin Company to his parents’ home in Saginaw, Kyle arrived at Court

Street and attempted to make a left-hand turn from Court Street onto North Charles Street. At the

intersection, Kyle swerved suddenly into the left lane, striking Daniel Reiss head on. Daniel Reiss

was driving a 2003 Harley Davidson. An eyewitness testified that for approximately three miles

before the crash, Kyle was speeding, swerving in and out of traffic, and driving carelessly. The

eyewitness further testified that it looked like the motorcycle exploded and Daniel Reiss went up

in the air, with a second witness testifying that he went approximately twenty-five feet in the air

before landing. Daniel Reiss sustained multiple injuries, including: a comminuted right distal radius

fracture; Type III A open comminuted left distal radius and ulnar fracture; high energy left

pertrochanteric femur fracture; Right zone 1 sacral fracture; comminuted bilateral pubic ramus

fracture; head injury; urologic injury and herniation; pain and suffering, mental anguish and

emotional distress. Daniel Reiss underwent extensive medical care and treatment as a result of his

injuries.

        Daniel Reiss filed a civil action in the Saginaw County Circuit Court against Kyle Beach,

Charles Beach, Paxson Oil Company d/b/a Fast Pax Food Stores, and Citizens Insurance for


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damages resulting from his injuries. Daniel Reiss’ three Minor Children, represented by their mother

and Daniel Reiss’ ex-wife Judith Reiss, subsequently filed a separate action in the Saginaw County

Circuit Court alleging negligence and ownership liability against Kyle Beach and Charles Beach,

and a claim against Paxson Oil Company under Michigan’s Dram Shop Act (the “Judith Reiss

Lawsuit”). Both lawsuits were later assigned to the Midland County Circuit Court due to the recusal

of each of the judges of the Saginaw County Circuit Court Bench.

       The parties agreed to a special case evaluation panel, which rendered separate damage

amounts against Kyle Beach and Charles Beach of $400,000 in favor of Daniel Reiss and $20,000

for each of the three Minor Children. Daniel Reiss’ claim against Paxson Oil Company resolved

through case evaluation in the amount of $1,750,000. The claims of the three children against

Paxson Oil Company settled as a result of the case evaluation in the additional amount of $80,000

per child. Case evaluation was unsuccessful as to Kyle Beach and Charles Beach.

       Following the case evaluation, Liberty Mutual, which was not a party to the state court

litigation, refused to offer its $100,000 policy limit in settlement of only Daniel Reiss’ claim.

Liberty Mutual contended that the $100,000 per person limit for bodily injury was the total amount

of available coverage to Charles and Kyle Beach for any injured person and that the Minor

Children’s claims for derivative injury are also so limited. Daniel Reiss, who it is worth noting is

not an insured or a party to the insurance agreement, alleges that this was the first time Liberty

Mutual “took [this] position.” Daniel Reiss Resp. to Pl.’s Mot. for Summ. J. 9.

       In the state court action, then-Plaintiff Daniel Reiss’ motion for summary judgment against

Kyle Beach and Charles Beach was granted by Midland County Circuit Court Judge Michael J.

Beale. As a result, the issues of liability, causation, comparative negligence, and the no-fault



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threshold of Daniel Reiss’ serious impairment of body function and permanent serious disfigurement

as to Kyle Beach and Charles Beach, Paxson Oil Company, and Citizens Insurance Company of the

Midwest were resolved.      Paxson Oil Company subsequently resolved the case, and Citizens

Insurance Company was later dismissed through a stipulated order. The only issue to be determined

in the instant action for declaratory judgment is the amount of Liberty Mutual’s indemnity obligation

to its insureds, Kyle Beach and Charles Beach.

                                                 II

       The Limit of Liability provision in Charles Beach’s Liberty Mutual Fire Insurance Company

Auto Policy (“the Auto Policy”) provides:

       The limit of liability shown in the Schedule or in the Declarations for each person
       for Bodily Injury Liability is our maximum limit of liability for all damages,
       including damages for care, loss of services or death, arising out of “bodily injury”
       sustained by any one person in any one auto accident. Subject to this limit for each
       person, the limit of liability shown in the Schedule or in the Declarations for each
       accident for Bodily Injury Liability is our maximum limit of liability for all damages
       for “bodily injury” resulting from any one auto accident.

       Charles Beach and Kyle Beach are listed as two of the covered drivers under the Auto Policy.

The relevant insurance policy period was from July 27, 2007 through July 28, 2008.

                                                 III

       Insurance contract construction principles are well-settled under Michigan law, and courts

are to examine the policy as a whole and enforce it in accordance with its terms. See, e.g., North

Am. Specialty Ins. Co. v. Myers, 111 F.3d 1273, 1278 (6th Cir. 1997); Upjohn Co. v. New

Hampshire Ins. Co., 438 Mich. 197, 207 (1991). Insurance companies may also limit the risks they

are willing to assume, and adjust its premiums accordingly. See Ill. Employers Ins. of Wasau v.

Dragovich, 139 Mich. App. 502, 507 (1984). When presented with a dispute, a court must

determine what the parties’ agreement is and enforce it. Fragner v. Am. Comm. Ins., 199 Mich.

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App. 537, 541 (1993). First, the court must determine whether the agreement is clear and

unambiguous on its face. Group Ins. Co. v. Czopek, 440 Mich. 590, 595 (1992). If an ambiguity

exists, the policy must be construed in favor of the insured. Powers v. DAIIE, 427 Mich. 602, 624

(1986). If no ambiguity is found, the court will uphold the clear meaning of the insurance contract

that does not violate public policy. Vanguard Ins. Co. v. Clark, 438 Mich. 463 (1991).

       Liberty Mutual argues that its Auto Policy limit of liability provision, provided in relevant

part above, is clear and that the damages alleged in the Judith Reiss Lawsuit are included in the “per

person” limit of liability of $100,000. Liberty Mutual asserts the relevant provision plainly states

that the “per person” limit of liability is the maximum amount payable for all damages arising out

of bodily injury sustained “by any one person in any one auto accident.” Daniel Reiss was the only

person who sustained bodily injury in the Accident. This fact is undisputed. Furthermore, Liberty

Mutual asserts that the Defendant minors were not in the accident, and thus could not have sustained

bodily injury “in” the accident.

       To support its interpretation of the Auto Policy provision language, Liberty Mutual contends

that Michigan courts have repeatedly applied the same interpretation to the same or similar language

as found in the instant Policy, with all damages claims, direct and consequential, resulting from

injury to one person being subject to the “per person” limitation. State Farm v. Descheemaeker, 178

Mich. App. 729, 732-33 (1983); see also Gibbs v. Armvoit, 182 Mich. App. 425 (1990); Auto Club

v. Lanyon, 142 Mich. App. 108 (1981). Liberty Mutual advances State Farm v. Descheemaeker as

being directly on point. In Descheemaeker, the insured, Carolyn Fliger, was involved in an

automobile accident with John Descheemaeker who sustained serious physical injuries. 178 Mich.

App. at 730. Fliger’s insurance policy provided liability coverage for bodily injury of $25,000 per

person and $50,000 per accident. Id. Descheemaeker filed suit against Fliger for his physical

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injuries, and his wife and children sought derivative damages for loss of consortium, society, and

companionship. Id. at 730-31. The parties agreed that Descheemaeker’s damages alone exceeded

$25,000 and that the damages to his wife and children also exceeded $25,000. Id. The claims

against Fliger were settled by payment of the undisputed $25,000 policy limit to a single individual,

Descheemaeker, with the second $25,000 left to the outcome of State Farm’s declaratory judgment

action. Id. The Michigan Court of Appeals agreed with the trial court’s decision in favor of State

Farm, finding that defendants were not entitled to the second $25,000. Id. The court reasoned that

the liability policy limit of $50,000 for “each accident” resulting in bodily injury did not apply

unless two or more persons sustained bodily injury in the same accident. Id. The court defined

“bodily injury” as meaning “bodily injury to a person and sickness, disease or death which results

from it,” stating that this definition has been found to be unambiguous and understood as

contemplating “actual physical harm or damage to a human body”. Id. (citing Nat’l Ben Franklin

Ins. Co. of Mich. v. Harris, 161 Mich. App. 86, 89 (1987); Farm Bureau Mut. Ins. Co. of Mich. v.

Hoag, 136 Mich. App. 326, 334-35 (1984)).

       Additionally, the court noted that “[n]on-physical injuries, such as humiliation and mental

anguish that lack any physical manifestations do not constitute “bodily injury,” and it follows that

other nonphysical injuries, such as a loss of consortium, society, and companionship, are also not

bodily injuries. Id. As a result, the second $25,000 policy limit did not apply to derivative claims

asserted by accident victim’s family members. Id. at 730. The court emphasized that even if the

claims made by the wife and children did meet the minimal requirement of physical manifestation,

the policy limit of $25,000 per person would preclude their recovery because their damages would

still be derivative in nature to John Descheemaeker’s bodily injury. Id. at 732. The court reasoned

that when a policy fixes a maximum recovery for “bodily” injury to one person, it has generally been

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held that the limitation is applicable to all claims of damages flowing from the bodily injury, even

if part of the damages are claimed by someone other than the person suffering the bodily injury in

the accident. Id. at 732-33. Stated otherwise, “all damage claims, direct and consequential,

resulting from injury to one person, are subject to the limitation.” Id. (emphasis added).

       Relying on this decision, Liberty Mutual notes that the Judith Reiss Lawsuit alleges that the

Minor Children suffered “economic and non-economic losses, including mental anguish, pain and

suffering, emotional distress, fright, shock, humiliation and embarrassment, and loss of consortium”

as a result of their father’s injuries. Judith Reiss Compl. ¶ 33 (emphasis added). As was the case

in Descheemaeker, Liberty Mutual argues that its policy adds language which further reinforces the

scope of the limit of liability provision by expressly stating that bodily injury must be sustained in

the accident. As a result, the Minor Children’s alleged damages claims are derivative of Daniel

Reiss’ injuries and thus included in the $100,000 per person limit. Liberty Mutual emphasizes that

the Judith Reiss Lawsuit acknowledges that the claims are derivative in nature, as it alleges that the

Minor Children suffered losses “as a result of their father, Daniel Reiss’ injuries.” Judith Reiss

Compl. ¶ 33.

       Liberty Mutual contends that although the Michigan Supreme Court has recognized that a

child can maintain a separate and independent claim for loss of parental society and companionship

under Berger v. Weber, 411 Mich. 1 (1981), this argument was rejected as applied to insurance

policy limits in Auto Club v. Lanyon, 142 Mich. App. 108 (1981). In Lanyon, the court concluded

that the child’s claims of loss of society and companionship were, in fact, derivative claims and the

child was not entitled to separate and independent limits despite the holding in Berger. Id. at 111-

12. The court reasoned that the bodily injury sustained by one person in any one occurrence

included “all injuries and damages sustained by others as a consequence of that bodily injury.” Id.

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As a result, the child’s claim for loss of society and companionship did not entitle her to a separate

claim for bodily injury which would increase the policy’s limitations. Id. Liberty Mutual argues

this same reasoning applies in the instant case, and the $100,000 policy limit of liability for bodily

injury should encompass the derivative claims made by Daniel Reiss’ Minor Children because

Daniel Reiss was the only person who sustained bodily injury in the accident.

       By contrast, Daniel Reiss relies on language from the Dram Shop Act, MCL 436.1801, that

provides for a spouse, child, parent or guardian of the injured individual to have a right of action in

his or her own name to support the argument that his children’s claims are not derivative of his

claims. Relying on this statute, Daniel Reiss argues that the Dram Shop Act requires that the

children bring their own lawsuit against Liberty Mutual’s insureds in order to prosecute their

“right(s) of action in his or her own name.” MCL 436.1801(3). Likewise, the Judith Reiss Lawsuit

alleges violations of the Dram Shop Act by Kyle Beach and Charles Beach. However, such an

argument does not apply to the instant action, not only because it is unrelated to the insuring

provisions of the policy but also because neither Kyle Beach nor Charles Beach were a person or

retail licensee who furnished the alcohol that contributed to the intoxication of the person causing

the injury. Instead, the claims at hand sound in common law negligence. Daniel Reiss’ Dram Shop

Act arguments are briefly included to discuss and distinguish the relevant facts from the main case

upon which Daniel Reiss relies, Auto Club Ins. Ass’n v. Hardiman.

       Daniel Reiss argues that Auto Club Ins. Ass’n v. Hardiman, 228 Mich. App. 470 (1998), is

the most appropriate authority in the instant case, and rejects the arguments raised by Liberty

Mutual. In Hardiman, a six year old child witnessed an accident in which her pedestrian brother

was struck by an automobile, rendering him a paraplegic. Id. at 472. The ACIA automobile policy

provided liability coverage of $100,000 per person and $300,000 per occurrence for bodily injury,

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and provided that the limit “per person” was the maximum that would be paid for bodily injury

sustained by one person in one occurrence, including all claims for derivative damages allowed

under the law. Daniel Reiss correctly asserts that this is similar to the language in the Liberty

Mutual policy, although it should be noted that the Hardiman policy limit was for one person in one

occurrence and the Liberty Mutual policy limit is for “one person in any one auto accident.”

Furthermore, the insurance company in Hardiman similarly argued that the child’s claims were

derivative of her brother’s claims and subject to the $100,000 per person limitation, inclusive of all

claims for derivative damages. Id. The child’s representative maintained that the $300,000 per

occurrence limitation was available to the child because her claim involved a separate, independent

cause of action that was not derivative of her brother’s claims. Id. The court of appeals affirmed the

trial court’s finding that the child’s claim was subject to the “per occurrence” as opposed to the “per

person” coverage limit because the child’s claim for intentional infliction of emotional distress was

made on her own behalf, for her own injuries, for a tort directed at her rather than at her brother. Id.

at 473. The court further stated that the claim for negligent infliction of emotional distress involved

a separate, independent cause of action, seeking recovery for a tort directed at the child personally

which was not contingent on any recovery by her brother. Id.

        Daniel Reiss contends that in the case at bar, the claims of the Minor Children are separate,

independent statutory causes of action seeking recovery for their own damages, and not for the

damages of their father. Relying on Berger v. Weber, supra, Daniel Reiss also alleges that the

Michigan Supreme Court has recognized a child’s independent right of action under the Dram Shop

Act for loss of parental society and companionship where the child’s parent is negligently injured,

noting that the success of the child’s claim is not contingent on any recovery under the statute or

common law. As a result, Daniel Reiss asserts that his children’s claims against the automobile

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owner and operator are not derivative and therefore not subject to the $100,000 per person limit

under the Policy. Furthermore, Daniel Reiss notes that in Hardiman, the ACIA cited the same three

cases in support of its argument that Liberty Mutual now argues apply to the instant case. The

Hardiman court concluded that the ACIA’s reliance on the cases was misplaced, finding that they

all involved claims by family members for loss of consortium, society, and companionship, and none

involved a claim of intentional or negligent infliction of emotional distress. 228 Mich. App. at 474.

        Daniel Reiss argues that Liberty Mutual’s reliance on this reasoning is similarly misplaced

because his children’s claims are separate, independent statutory claims under the Dram Shop Act.

Daniel Reiss emphasizes that Section 5 of the Dram Shop Act provides that an action under the Act

against a retail licensee shall not be commenced unless the minor or alleged intoxicated person is

a named defendant in the action, and is retained in the action until the litigation is concluded by trial

or settlement.

        Daniel Reiss’ assertion that the holding in Hardiman and the language in Section 5 of the

Dram Shop Act are applicable is incorrect. Section 3 of the Dram Shop Act provides

        Except as otherwise provided in this section, an individual who suffers damage or
        who is personally injured by a minor or visibly intoxicated person by reason of the
        unlawful selling, giving, or furnishing of alcoholic liquor to the minor or visibly
        intoxicated person, if the unlawful sale is proven to be a proximate cause of the
        damage, injury, or death, or the spouse, child, parent, or guardian of that individual,
        shall have a right of action in his or her name against the person who by selling,
        giving, or furnishing the alcoholic liquor has caused or contributed to the
        intoxication of the person or who has caused or contributed to the damage, injury,
        or death.

        MCL 436.1801(3) (emphasis added). As noted above, a Dram Shop Act claim is properly

brought against the party who provided alcohol to a minor or intoxicated person, where the unlawful

sale is a proximate cause of the injury. Under Section 5 it is required that the minor or intoxicated



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person be an identified plaintiff in the case. They are not, by statute, required to be a defendant

because of his or her potential liability under the Dram Shop Act. Neither Kyle Beach nor Charles

Beach unlawfully sold, gave, or furnished alcohol in the case at hand as is required by the Dram

Shop Act. Alternatively, the Minor Children’s claims against Kyle Beach and Charles Beach sound

in negligence and are common law claims, not statutory Dram Shop Act claims.

       Additionally, the child in Hardiman was an eyewitness to an accident that rendered her

brother a paraplegic, with the court concluding that the cause of action for negligent infliction of

emotional distress by the minor bystander–a person within the zone of danger at the accident–was

not derivative. The court expressly noted the limited aspect of its decision, stating that it was

“presented with the single narrow legal issue of whether defendant’s bystander claim of negligent

infliction of emotional distress is derivative of [her brother’s] negligence claim, such that it is

subject to the same $100,000 a person limit of coverage as her brother’s claim.” Hardiman, 228

Mich. App. at 473. The court also distinguished the minor’s claim from derivative injury claims,

finding that “[u]nlike the loss of consortium claim, an injury the bystander suffers is not one that

results from an injury to another person. Rather, the injury is directly to the bystander as a result

of the bystander seeing the accident and reasonably believing that the direct victim of the accident

would be seriously injured or killed . . . .” Id. at 476 (emphasis in the original). Here, the minor

children were not eyewitnesses to the accident, and, as stated by Daniel Reiss, fortunately not even

present at the time of the accident. As noted above, Judith Reiss states that the injuries to the minor

children were “as a result of their father, Daniel Reiss’ injuries.” Judith Reiss Compl. ¶ 33. Such

injuries, using language from the Hardiman opinion, “result[ed] from an injury to another person.”

       In Defendant Judith Reiss’ response, she notes that Liberty Mutual relies on a series of

decisions from the Michigan Court of Appeals in support of the relief sought in its motion, all of

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which were issued prior to November 1, 1990. Judith Reiss asserts that these decisions are not

authoritative precedent pursuant to MCR 7.215(J)(1). Judith Reiss offers Hardiman as controlling

precedent after November 1, 1990, and asserts that it has not been reversed or modified. However,

as noted above, Hardiman is distinguishable on the facts because the Minor Children’s claims are

based on their father’s injuries. While the decisions cited by Plaintiff may lack precedential force,

the reasoning of the cases is sound and not inconsistent with any known published precedent.

Because the cases offered by Liberty Mutual present similar and useful factual comparisons, as well

as guidance on areas of applicable law that are not inconsistent with any known published precedent,

the authority presented by Liberty Mutual is, at a minimum, highly persuasive.

        The Minor Children’s claims against Kyle Beach and Charles Beach do not arise under

liability imposed by the Dram Shop Act and do derive from their father’s injuries. Plaintiff’s motion

for summary judgment will be granted because the applicable policy limit of liability for bodily

injury resulting from the Accident is the “per person” limit of $100,000 for all damages claims made

by Daniel Reiss and the Minor Children for damages arising out of the Accident.

                                                  IV

        Daniel Reiss also challenges the interpretation of the Beach’s policy in his response. He

asserts that the children did suffer “bodily injury” within the meaning of the policy, which states that

“bodily injury” means “bodily harm, sickness or disease that results.” Daniel Reiss emphasizes that

the policy does not define the meaning “bodily harm, sickness or disease.” The mere fact that a term

is not defined in a policy does not render that term ambiguous. Henderson v. State Farm Fire and

Cas. Co., 460 Mich. 348, 354 (1999). In such an instance, the reviewing court must interpret the

terms of the contract in accordance with their commonly used meanings. Id. Daniel Reiss asserts

that in determining the common use of a term or phrase, use of a dictionary is appropriate. Stanton

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v. City of Battle Creek, 466 Mich. 611, 617 (2002) (interpreting the phrase “motor vehicle” under

the Michigan Vehicle Code). Relying on Webster’s New World Dictionary (3rd College Edition),

Daniel Reiss offers the meaning of “sick” as including “deeply disturbed or distressed; extremely

upset, as by grief, disappointment, disgust, fear, etc.”; “in poor condition; impaired; unsound”; and

“mentally ill or emotionally disturbed.” He also asserts that the definition of “disease” includes “any

departure from health; illness in general”; and “any harmful or destructive condition” and the

definition of “harm” includes “hurt; injury; damage.”

       Daniel Reiss argues that when the common, ordinary meaning of the language used in the

Auto Policy are read in the context of his Minor Children’s claims, it cannot be reasonably argued

that the children did not suffer “bodily injury,” and that even if the Court accepts Liberty Mutual’s

argument that there must be a “physical manifestation” then it gives rise to a genuine issue of

material fact because no discovery has been conducted regarding the children’s injuries. However,

as noted above, even if the children did have a physical manifestation, the $100,000 policy limit

would preclude their recovery because their damages would still be derivative in nature to their

father’s bodily injury. See Descheemaeker, 178 Mich. App. at 732.

       Daniel Reiss argues that Liberty Mutual’s argument that because the children were not

physically “in the accident” they could not have sustained “bodily injury” is novel and should be

rejected pursuant to Hardiman. Daniel Reiss highlights that the language in the insurance contract

in Hardiman essentially mirrors the language in the Auto Policy. As discussed above, the alleged

injuries in the instant case are distinguishable from the injuries of the child in Hardiman.

Furthermore, Daniel Reiss contends that although his children did not witness the accident itself as

did the minor child in Hardiman, they have witnessed and continue to witness the disabling and

disfiguring injury to their father, resulting in harm, sickness and damages to the Minor Children.

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Daniel argues that the children should not be penalized and denied coverage determined to be

available to the child in Hardiman because they were not “in” the accident. He further asserts that

the definition of the word “in” includes: “affected by”; “with regard to” and “as concerns,”

Webster’s Dictionary, supra, and that Liberty Mutual’s restrictive definition requiring actual

physical involvement should be rejected. Daniel emphasizes that the principle of requiring a child

to be physically “in” the accident was rejected in Hardiman as the child in Hardiman was in the

zone of danger and suffered her own, personal injuries as a result of the accident which were wholly

independent of those caused to her brother. The Minor Children in this case by contrast do not have

claims wholly independent of their father’s injuries, but instead only have claims that are admittedly

derivative of their father’s. See Judith Reiss Compl. ¶ 33.

       Finally, Daniel Reiss offers the curious argument, as a stranger to the Beach’s policy with

Liberty Mutual, that where a fair reading of a contract leads one to understand there is no coverage

and another to understand there is coverage, the contract is ambiguous and should be construed

against the drafter and in favor of coverage. Raska v. Farm Bureau, 412 Mich. 355, 362 (1982).

Although insurance contracts are generally considered contracts of adhesion and ambiguous terms

are construed against the drafter under general contract principles, id. at 371-72, the Auto Policy

language is not ambiguous or unfair in this case. An interpretation construing the language to

broaden its scope is inappropriate, and would be taking the language out of the “reasonable

expectations of the parties.” Id. Furthermore, as discussed above, “bodily injury” has been found

to mean “bodily injury to a person and sickness, disease or death which results from it,” with the

court in that case finding that this definition is unambiguous and understood as contemplating

“actual physical harm or damage to a human body”. Descheemaeker, supra (citing Harris, 161

Mich. App. at 89; Hoag, 136 Mich. App. at 334-35. Because the Minor Children were not in the

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     1:10-cv-10757-TLL-CEB Doc # 25               Filed 11/03/10 Pg 16 of 18         Pg ID 313



accident, nor were they near the accident as witnesses in the zone of danger, their resulting injuries

are derivative of their father’s injuries and Liberty Mutual’s motion for summary judgment will be

granted.

                                                  V

       Daniel Reiss also argues that Liberty Mutual and its insureds did not object to the state

court’s scheduling order and participated in the case evaluation as ordered by the court. Daniel Reiss

notes that he and the Minor Children had separate case evaluation awards and separate fees paid to

the case evaluation panel. Daniel Reiss contends that if a liability insurer defends with knowledge

of facts that would allow avoidance of liability to the insured, but does not provide reasonable notice

of the possible disclaimer to the insured, a presumption of prejudice arises, making proof of actual

prejudice unnecessary to apply estoppel to any coverage defenses. Smit v. State Farm Mut. Auto.

Ins. Co., 207 Mich. App. 674, 685 (1994). Waiver or estoppel may be applied to extend coverage

to losses not within the terms of the policy if the inequity to the insurer that will result from

broadening the policy coverage is outweighed by the inequity suffered by the insured. Lee v.

Evergreen Regency Coop., 151 Mich. App. 281, 286 (1986).

       Liberty Mutual asserts that it has not waived its rights to rely upon the limits of liability in

the Policy, and is not estopped from doing so. Liberty Mutual was not a party to either underlying

state court lawsuit, and contends the assertion that its insureds should have objected to the case

evaluation procedure on its behalf have no merit. The parties’ papers do not reflect whether the

Beaches were represented by counsel provided by Liberty Mutual. Moreover, under Michigan law,

absent knowledge and participation by Liberty Mutual, the doctrines of waiver and estoppel cannot

broaden the coverage offered by an insurance policy. Kirschner v. Process Design Assoc., Inc., 459

Mich. 587, 594 (1999) (citing Ruddock v. Detroit Life Ins. Co., 209 Mich. 638, 654 (1920))

                                                 -16-
     1:10-cv-10757-TLL-CEB Doc # 25                Filed 11/03/10 Pg 17 of 18          Pg ID 314



(emphasis added). This is not a case where coverage is at issue, but rather contract interpretation

of the stated limit of liability for bodily injury. See Allstate Ins. Co. v. Tozer, 392 F.3d 950, 956 (7th

Cir. 2004) (concluding that the doctrine of estoppel does not prevent an insurer from asserting that

emotional distress claims are subject to an “each person” limit of liability applicable to another’s

bodily injuries). Additionally, the court in Smit, a case on which Daniel Reiss relies, concluded that

the trial court erred in holding that estoppel or waiver precluded the insurance company from

establishing that the loss at issue was excluded under the terms of the insurance policy. 207 Mich.

App. at 685.

        Daniel Reiss has not advanced any facts that would justify the applicability of the doctrines

of waiver and estoppel and thus preclude Liberty Mutual from asserting that the Minor Children’s

claims in the Judith Reiss Lawsuit are subject to the “each person” limit of liability applicable to

another’s bodily injuries. As a result, Liberty Mutual’s motion for summary judgment will be

granted.

                                                   VI

        Accordingly, Plaintiff Liberty Mutual’s motion for summary judgment [Dkt # 18] is

GRANTED, and the Court CONFIRMS that Liberty Mutual’s obligation to indemnify its insureds

under the policy purchased by Charles Beach is limited to $100,000 for all damages, both direct and

derivative, arising from Daniel Reiss’ automobile/motorcycle accident.

                                                s/Thomas L. Ludington
                                                THOMAS L. LUDINGTON
                                                United States District Judge
Dated: November 3, 2010




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1:10-cv-10757-TLL-CEB Doc # 25                   Filed 11/03/10 Pg 18 of 18               Pg ID 315




                                      PROOF OF SERVICE

              The undersigned certifies that a copy of the foregoing order was served
              upon each attorney or party of record herein by electronic means or first
              class U.S. mail on November 3, 2010.

                                                s/Tracy A. Jacobs
                                                TRACY A. JACOBS




                                               -18-

				
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